When to fire a CEO: optimal termination in dynamic contracts
成果类型：
Article
署名作者：
Spear, SE; Wang, C
署名单位：
Iowa State University; Carnegie Mellon University
刊物名称：
JOURNAL OF ECONOMIC THEORY
ISSN/ISSBN：
0022-0531
DOI：
10.1016/j.jet.2004.02.008
发表日期：
2005
页码：
239-256
关键词：
摘要：
Existing models of dynamic contracts impose that it is both optimal and feasible for the contracting parties to bind themselves together forever. This paper introduces optimal termination in dynamic contracts. We modify the standard dynamic agency model to include an external labor market which, upon the dissolution of the contract, allows the firm to return to the labor market to seek a new match. Under this simple closure of the model, two types of terminations emerge. Under one scenario, the agent is fired after a bad output and he becomes too poor to be punished effectively. Under the second scenario, the agent is forced out after a good output and he becomes too expensive to motivate. (C) 2004 Elsevier Inc. All rights reserved.